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Stock OptionsOptions are a major component of compensation in the Silicon Valley. However, companies don't do a lot to explain how the options work. I can help you get comfortable with your options, and develop a strategy to maximize their value.
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Incentive Stock Options
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•Incentive Stock Option (ISO)– Most tax advantaged option, but also the most complicated. You will likely pay Alternative Minimum Tax (AMT) on exercise, but you can get a credit for this if you hold long-term. Also – there’s no withholding. In the end, you can qualify for long term treatment on the exercise AND sale.
•Nonqualified Stock Option (NSO) – When you exercise, you purchase it cheaply, and the discount is treated like compensation income. Tax is withheld at 25% federal, and state withholding. Note – this may not be the actual tax due. You can then decide whether to hold the stock for long term treatment or not from the point of exercise. •Restricted Stock Units (RSU) – Similar to NSO, but the stock vests, there is no need to purchase it at exercise |
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See the attached presentation discussing stock option concepts. I'd be happy to discuss these in greater detail with you - just send me an email. | ||